Imagine you had a money-making machine to harvest gains in the stock market while you sat back to enjoy life.
That’s everyone’s dream, right? Investor Vance Howard thinks he’s found it.
Howard and his small army of computer programmers at Howard Capital Management in Roswell, Ga., have a quantitative system that posts great returns.
His HCM Tactical Growth Fund
HCMGX,
beats its Russell 1000 benchmark index and large-blend fund category by 8.5-10.4 percentage points annualized over the past five years, according to Morningstar. That is no small feat, and not only because it has to overcome a 2.22% fee. Beating the market is simply not easy. His HCM Dividend Sector Plus
HCMQX,
) and HCM Income Plus
HCMLX,
funds post similar outperformance.
There are drawbacks, which I detail below. (Among them: Potentially long stretches of underperformance and regular tax bills.) But first, what can we learn from this winner?
So-called quants never share all the details of their proprietary systems, but Howard shares a lot, as you’ll see. And this Texas rancher has a lot of good advice based on “horse sense” — not surprising, given his infectious passion for the markets, and his three decades of experience as a pro.
Here are five lessons, 12 exchange traded funds (ETFs) and four stocks to consider, from a recent interview with him.
Lesson #1: Don’t be emotional
It’s no surprise so many people do poorly in the market. Evolution has programmed us to fail. For survival, we’ve learned to run from things that frightens us. And crave more of things that are pleasurable — like sweets or fats to store calories ahead of what might be a long stretch without food. But in the market, acting on the emotions of fear and greed invariably make us do the wrong thing at the wrong time. Sell at the bottom, buy at the top.
Likewise, we’re programmed to believe being with the crowd brings safety. If you’re a zebra on the Savanna, you are more likely to get picked off by a predator if you go it alone. The problem here is being part of a crowd — and crowd psychology — dumb us down to a purely emotional level. This is why people in crowds do terrible things they would never do on their own. It doesn’t matter how smart you are. When you join a crowd, you lose a lot of IQ points. Base emotions take over.
To do well in the market, you have to counteract these tendencies. “One of the biggest mistakes individual investors and money managers make is getting emotional,” says Howard. “Let your emotions go.”
Lesson #2: Have a system and stick to it
To exorcise emotion, have a system. “And don’t second guess it,” says Howard. “This keeps you from letting the pandemic or Afghanistan scare you out of the market.” He calls his system the HCM-BuyLine. It is basically a momentum and trend-following system — which often works well in the markets.
The…
Read More: Opinion: Beat the market with this quant system that’s very bullish
Opinion: Beat the market with this quant system that’s very bullish
Imagine you had a money-making machine to harvest gains in the stock market while you sat back to enjoy life.
That’s everyone’s dream, right? Investor Vance Howard thinks he’s found it.
Howard and his small army of computer programmers at Howard Capital Management in Roswell, Ga., have a quantitative system that posts great returns.
His HCM Tactical Growth Fund
HCMGX,
beats its Russell 1000 benchmark index and large-blend fund category by 8.5-10.4 percentage points annualized over the past five years, according to Morningstar. That is no small feat, and not only because it has to overcome a 2.22% fee. Beating the market is simply not easy. His HCM Dividend Sector Plus
HCMQX,
) and HCM Income Plus
HCMLX,
funds post similar outperformance.
There are drawbacks, which I detail below. (Among them: Potentially long stretches of underperformance and regular tax bills.) But first, what can we learn from this winner?
So-called quants never share all the details of their proprietary systems, but Howard shares a lot, as you’ll see. And this Texas rancher has a lot of good advice based on “horse sense” — not surprising, given his infectious passion for the markets, and his three decades of experience as a pro.
Here are five lessons, 12 exchange traded funds (ETFs) and four stocks to consider, from a recent interview with him.
Lesson #1: Don’t be emotional
It’s no surprise so many people do poorly in the market. Evolution has programmed us to fail. For survival, we’ve learned to run from things that frightens us. And crave more of things that are pleasurable — like sweets or fats to store calories ahead of what might be a long stretch without food. But in the market, acting on the emotions of fear and greed invariably make us do the wrong thing at the wrong time. Sell at the bottom, buy at the top.
Likewise, we’re programmed to believe being with the crowd brings safety. If you’re a zebra on the Savanna, you are more likely to get picked off by a predator if you go it alone. The problem here is being part of a crowd — and crowd psychology — dumb us down to a purely emotional level. This is why people in crowds do terrible things they would never do on their own. It doesn’t matter how smart you are. When you join a crowd, you lose a lot of IQ points. Base emotions take over.
To do well in the market, you have to counteract these tendencies. “One of the biggest mistakes individual investors and money managers make is getting emotional,” says Howard. “Let your emotions go.”
Lesson #2: Have a system and stick to it
To exorcise emotion, have a system. “And don’t second guess it,” says Howard. “This keeps you from letting the pandemic or Afghanistan scare you out of the market.” He calls his system the HCM-BuyLine. It is basically a momentum and trend-following system — which often works well in the markets.
The…
Read More: Opinion: Beat the market with this quant system that’s very bullish